Opportunities in Space: Interview with Orbital’s David Thompson

Foremost “space entrepreneur,” David Thompson, is co-founder, Chairman and CEO of Orbital Sciences Corporation, one of the world’s leading developers and manufacturers of space and launch systems with over 3,000 employees and more than $1 billion in annual sales. He pioneered new classes of rockets, satellites and other space-based technologies that have made the benefits of space more affordable, accessible and useful to millions of people on Earth. After earning his B.S. from MIT and M.S. from CalTech, and various stints as a NASA engineer and project manager, Mr. Thompson went to Harvard Business School where he and two classmates wrote a prize-winning MBA study paper that became the blueprint for Orbital. He shares with MITER his experiences and insights, including opportunities for aspiring space entrepreneurs.

MITER: You’re one of the world’s most successful “space entrepreneurs.” How did you start?

DAVID THOMPSON: Two friends and I started Orbital in April 1982, about a year after graduating from business school.I had been thinking about forming a rocket manufacturing company since the late 1970’s, when I worked for NASA, but didn’t really consider it seriously until meeting my partners in 1979 and 1980. We worked together on a project at business school that NASA funded, looking at commercial ventures in space, during 1980 and 1981. In the fall of 1981, the project was awarded a prize by an educational and research foundation in Houston.Later on, several of the benefactors of this group provided the start-up capital we needed to get the company off the ground in 1982.

MITER: How were your work experiences in college, such as your summer internships, important to your future success in business?

DAVID THOMPSON: While an undergraduate at MIT, I worked each summer at a NASA laboratory, beginning after my freshman year in Virginia, then later in California and finally in Texas.This helped me develop an understanding of the structure of space programs, and an appreciation of the strengths and weaknesses of government management of space activities.

MITER: As a rising young scientist, what made you decide to go to business school and what did you gain from the experience?

DAVID THOMPSON: After college (at MIT) and graduate school (at Caltech), I went back to NASA to work as a young engineer on advanced rocket engines at the space agency’s laboratory in Alabama.During this time, it occurred to me that a lot of space technology was being developed by federal programs that could be put to use to lower the cost of launching satellites into space, but that this was best done by private companies and not government agencies (that sounds almost self-evident now, but it was a new idea 30 or 35 years ago!).After a couple of years at NASA, I decided to enroll in business school to obtain the basic knowledge that might allow me to give this approach a try.

MITER: Statistically, most successful start-ups have multiple founders (including Orbital). How important was the collaboration between you and your two co-founders to the company’s success?

DAVID THOMPSON: In Orbital’s case, having a three-person founding group was very important.We were proposing to start and develop a fairly complex business, with multi-faceted challenges in engineering, manufacturing, marketing, finance and regulatory areas.The three of us brought complementary skills and experiences to this undertaking, so we had a much stronger appreciation of the essential tasks to be accomplished and the main risks to be managed.

MITER: What, if any, unique challenges face a start-up in an industry dominated by the government?

DAVID THOMPSON: There were (and still are) several unusual challenges faced by a start-up enterprise in the space industry.First, the products we intended to build (rockets and spacecraft) are technically complex and fairly expensive, and since they ordinarily operate as part of larger systems (e.g., a mission to Mars or a network of communications satellites and ground stations), the consequences are grave if they fail to perform properly or are late to be delivered.Therefore, the threshold of customer acceptance for new products from an unproven company is very high.Second, the start-up capital needed to develop and produce such products is quite substantial…in our case, over $50 million was required (in 1982 dollars!) just to cover R&D on our first rocket.And third, we were competing against well-established aerospace and defense companies with orders of magnitude greater manpower and financial resources than we had.Putting these factors, the barriers to entry by a new enterprise were formidable!

MITER: You have grown Orbital organically and through acquisitions, and developed and divested some successful, but non-core businesses (most notably “Magellan” and “GeoEye”). Do you have an overarching business philosophy that guides your strategy for the company?

DAVID THOMPSON: While several tenets of our approach to the space business have remained constant for nearly 30 years, other elements of our strategy have evolved since the company’s early years.For example, in the 1990’s, we invested heavily in a couple of satellite service ventures that used our core products to put together space-based systems for global data communications and Earth imaging.By the late 1990’s, these projects were consuming capital at a rate which Orbital itself could not continue to supply, so we decided to spin them off into free-standing companies that could tap other sources of investment for their growth.After experimenting with these and a couple of other business models, we found some that worked well and others that did not.Over the last five or ten years, we’ve focused on the former and divested the later ones.

MITER: Orbital has adapted successfully to significant change in the space industry, but it has also driven change in the industry.How do you see the industry evolving over the next ten years?

DAVID THOMPSON: I expect satellite communication, navigation and imaging will continue to grow, so that by 2020 over a billion people around the world will have direct and instantaneous access to space-provided information from pocket-sized devices. I also think the on-going revolution in astronomy and space science will accelerate with new satellite observatories coming on-line, while Earth-monitoring spacecraft will make major contributions to climate change research and mitigation policies. From a technology standpoint, applying electronics and optics advances, and perhaps materials improvements, are likely to be the big story, making possible much more capable and less expensive satellites for a variety of applications.

MITER: If you were writing your business school report today, what opportunity would you target?

DAVID THOMPSON: That’s a tough question. Given the rapid-paced dynamics of commercial satellite communications and broadcasting, that’s probably the first place I would explore.Big changes can create big opportunities, and this is an area where big changes seem to come every couple of years.

MITER: Do you have any advice for aspiring entrepreneurs?

DAVID THOMPSON: My advice is to invest the time and energy at the beginning to really understand your intended market and the existing alternatives customers are presented with as they consider your proposed product or service.It’s great to have technology on your side, but many times that is not a sufficient condition for business success.

Grace Young is an undergraduate at MIT majoring in ocean engineering, with interests in robotics, physics, computer science, and architecture. Last summer she worked at Woods Hole Oceanographic Institution building autonomous aircraft for ocean surveying. The summer before she worked at CERN, the large hadron collider, developing software for particle physicists, and at the Harvard-MIT Biomedical Cybernetics Lab in Boston applying statistical methods for bioinformatics. Her other work experience includes quantum computing research at The Joint Quantum Institute and analysis of electrical properties of carbon nanotubes at Johns Hopkins. She is a member of MIT’s varsity sailing team, Gordon Engineering Leadership Program, and Arts Scholar Program. She is also the 2012-2013 recipient of MIT’s Robert Bruce Wallace Academic Prize in Ocean Engineering.